TY - JOUR
T1 - Measuring financial exclusion of firms
AU - Kling, Gerhard
N1 - Supplementary material associated with this article can be found, in the online version, at 10.1016/j.frl.2020.101568
Supplementary Data S1. Supplementary Raw Research Data. This is open data under the CC BY license http://creativecommons.org/licenses/by/4.0/
PY - 2021/3
Y1 - 2021/3
N2 - Financial ratios such as leverage or indices based on firm characteristics (KaplanZingales, Whited-Wu, Hadlock-Pierce) have been used to measure whether a firm has too much debt. Let’s assume a firm does not have any debt. Does this ‘choice’ reflect financial strength or exclusion? To measure the latter, this paper develops a theory to estimate the value of financial constraints. Based on a strictly concave production function, firms that face financial constraints take longer to reach their steady-state. This added time diminishes firm value, which translates into a shadow price of relaxing financial constraints.
AB - Financial ratios such as leverage or indices based on firm characteristics (KaplanZingales, Whited-Wu, Hadlock-Pierce) have been used to measure whether a firm has too much debt. Let’s assume a firm does not have any debt. Does this ‘choice’ reflect financial strength or exclusion? To measure the latter, this paper develops a theory to estimate the value of financial constraints. Based on a strictly concave production function, firms that face financial constraints take longer to reach their steady-state. This added time diminishes firm value, which translates into a shadow price of relaxing financial constraints.
KW - impulse control
KW - financial contraints
KW - financial exclusion
KW - Financial constraints
KW - Impulse control
KW - Financial exclusion
UR - http://www.scopus.com/inward/record.url?scp=85085165896&partnerID=8YFLogxK
U2 - 10.1016/j.frl.2020.101568
DO - 10.1016/j.frl.2020.101568
M3 - Article
VL - 39
JO - Finance Research Letters
JF - Finance Research Letters
SN - 1544-6123
M1 - 101568
ER -